WEST AFRICAN GAS PIPELINE PROJECT ACT 2005

Transcription

1 WEST AFRICAN GAS PIPELINE PROJECT ACT 2005 EXPLANATORY MEMORANDUM This Act provides for national legislation to implement the obligations of the Federal Republic of Nigeria under the WAGP Treaty and the International Project Agreement of the West African Gas Project involving the Federal Republic of Nigeria and the Republics of Benin, Ghana and Togo. WEST AFRICAN GAS PIPELINE PROJECT ACT 2005 ARRANGEMENT OF SECTIONS PART I-CORPORATE MATTERS 1. Local incorporation of the West African Pipeline Company, shippers, buyers and other persons, etc. 2. Registration as a foreign or external company, filing obligation, share transfers and charges. 3. Keeping of accounts and submission. of reports. PART II- THE WAGP AUTHORITY 4. Power of the WAGP Authority.

2 5. Steering Committee to perform initial functions. 6. Reporting and monitoring of the WAGP Authority. 7. Reliance on WAGP Authority actions and authorizations. 8. Government to be bound the actions of the WAGP Authority. 9. Funding of the WAGP Authority. PART III-LICENSING 10. Grant and conditions of pipeline licence. 11. Duration of the licence. 12. Mortgage of a-licence. 13. Rights conferred licence. 14. Approval to operate.

3 15. No other licence required. 16. Electricity and telecommunications. 17. Transmission, export or import of natural gas. 18. Dealing in natural gas shippers and buyers, etc. 19. Restrictions on transmission of natural gas during emergency period. PART IV-WAGP REGULATIONS 20. Power of the Minister to make and implement the WAGP Regulations, etc. 21. Exclusive regulation of matters contained in the Second Schedule. 22. Power to amend and supplement. PART V-FINANCIAL PROVISIONS 23. Agreed fiscal regime. 24. Non WAGP Regime.

4 25. Buyers, sellers, shippers and Project contractors. 26. Foreign currency and financial transactions. 27. Additional benefits and exemptions for Company. 28. Authority of the Nigerian National Petroleum Corporation. 29. Security and assets. 30. Performance guarantee. 31, Waiver of immunity. PART VI-ENVIRONMENTAL PROVISIONS 32. General environmental liability. 33. Exemption from liability for certain environmental damage. 34. Mitigation measures for certain environmental impacts existing before the commencement of the Project. PART VII-MISCELLANEOUS PROVISIONS

5 35. Empowerment to carry out the project. 36. Anti-trust provisions. 37. Ownership of pipeline system: 38. Insurance program. 39. Disapplication of other laws. 40. Inconsistency of this Act with other laws. 41. Interpretation. 42. Short Title. SCHEDULES FIRST SCHEDULE SUPPLEMENTARY PROVISIONS RELATING TO AGREED FISCAL REGIME SECOND SCHEDULE

6 SUBJECT MATTER OF THE WAGP REGULATIONS. WEST AFRICAN GAS PIPELINE PR01Eer ACT, 2005 A BILL FOR ANACTMENT TO PROVIDE FOR THE IMPLEMENTATION OF THE TREATY ON THE WEST AFRICAN GAS PIPE LINE PROJECT AND INTERNATIONAL PROJECT AGREEMENT,AND FOR RELATED MATTERS PREAMBLES Where as Federal Republic of Nigeria is a Party to the Treaty on the West African Gas Pipeline" Project (in this Act referred to as "the WAGP Treaty") entered into the Republic of Benin, the Republic of Ghana. the Federal Republic of Nigeria and the Republic of Togo dated 31s1 January. 2003; And whereas the Parties to the WAGP Treaty entered into an International Project Agreement with the West African Gas Pipeline Company Limited pursuant to the provisions of Article V II of the WAGP Treaty on 28th May, 2003; And where as the WAGP Treaty including me International Project Agreement has been ratified Nigeria; Now therefore It is- Enacted the National Assembly of the Federal Republic of Nigeria - PART I- CORPORATE MATTERS 1-(1) The West African Gas Pipeline Company (in this Act referred to as "The Company") shall- perform the functions required to be performed it under the terms of the International Project Agreement in its own right; and

7 not be required to incorporate a subsidiary in Nigeria or conduct its operations in Nigeria through a subsidiary reason only of- (i) (ii) (iii) the grant or exercise of the project rights or the project authorizations; the establishment in Nigeria of a place of business for the purpose of the Project; or the implementation of the Project. (2) Any shipper or buyer in Nigeria, in its own right. may- acquire natural gas for transmission through the Pipeline System; or contract with the Company to transport natural gas through the Pipeline System; or (e) contract with another person to transport natural gas through other pipeline facilities to the Pipeline System, and shall not be required to incorporate or act through a subsidiary in Nigeria reason only of that acquisition or transmission. (3) Any person in Nigeria either in its own behalf or on behalf of another person, in his or its own right. may- offer for sale, promote the sale of or sell natural gas to be transported through the Pipeline System; or

8 deliver gas through the Pipeline system; and shall not be required to incorporate or act through a subsidiary in Nigeria reason only of that activity. 2.-(1) without prejudice to Section I of this Act, the Company shall establish a legal presence in Nigeria and shall be exempted from any requirement in the Companies and Allied Matters Act- to a foreign company or incorporate as a separate local legal entity and the Commission shall maintain a registration for the Company as an external company. (2) In order to register as an external company, the Company shall deliver a statement to the Commission containing the following information about the Company- (c) (d) (e) (f) (g) (h) its name; its country of incorporation. its registration number and the identity of the register in its country of incorporation; the address of its registered office in its country of incorporation; copies of its constitutional documents: details of its directors and secretaries; the amount of its authorised and issued share capital; the address of any office of the Company in Nigeria; and the name and address of all persons resident in Nigeria authorised to accept service on behalf of the Company in respect of the business of any branch of the Company in Nigeria. (3) The Company shall not be required to comply with any reporting and filing requirements under any law or enactment other than the following reporting requirements- the Company shall notify the Commission of any change to any information contained in the statement delivered under subsection (2) of this section within 28 days of the change occurring thereof; and

9 the Company shaft submit to the Commission audited financial reports prepared in accordance with section 3 of this Act within 6 months of the end of each tax year. (4) Notwithstanding anything to the contrary contained in any enactment or law, there shall be no restriction on the ownership of any transfer of, or any transaction concerning, shares in or the share capital of the Company and any sale, transfer. pledge of or other transaction in the share capital of the Company or the share capital of a shareholder shall not be subject to any prior approval of any authority in Nigeria nor shall it give rise to any right to suspend or revoke a project authorisation or a project right nor to amend the terms or conditions thereof. (5) If the Company creates a mortgage, charge or other security interest over any property situated in Nigeria, the Company or the holder of the security interest may register the charge with the Commission or with any other appropriate registry, in the same manner as a company incorporated in Nigeria. (6) In respect of a mortgage, charge or security interest registered as provided in subsection (5) of this section, section 198 of the Companies and Allied Matters Act shall apply to the Company in the same manner as a company incorporated in Nigeria. 3.-(1) The Company and any of its branches, places of business or subsidiaries in Nigeria shall keep bank accounts in such currencies as it considers appropriate. (2) All financial statements and reports to be prepared and submitted the Company or any of its subsidiaries to any applicable authority in Nigeria shall be prepared in US dollars in accordance with the accounting principles. (3) The Company shall have no obligation to prepare or maintain or file financial reports in respect of any branch, subsidiary or place of business in Nigeria or otherwise solely in respect of the Company's activities in Nigeria. PART II-THE WAGP AUTHORITY

10 4. The WAGP Authority shall have the power to- (c) perform the functions assigned to it under the WAGP Treaty: monitor compliance the Company with the WAGP Regulations; and exercise the powers conferred on it under the WAGP Regulations. 5. The Steering Committee shall be responsible for carrying out the functions of the WAGP Authority prior to the WAGP Authority having acquired the full authority to perform its functions. 6. The WAGP Authority shall in accordance with the WAGP Treaty report to and be subject to the direction of the Committee of Ministers in respect of any of its activities in or relating to Nigeria 7. The Company and each buyer, seller and shipper shall be entitled to act in reliance on the exercise the WAGP Authority of the powers conferred upon it this Act, the WAGP Treaty or the WAGP Regulations. 8. The Government shall be bound the actions and decisions of the WAGP Authority to the extent of the powers conferred upon it this Act, the WAGP Treaty or the WAGP Regulations 9. The Government shall have the power to take all measures required of it under the WAGP Treaty or the international Project Agreement. or which it considers necessary, to provide funds and support the activities of the WAGP Authority as uie need arises. PART III- LICENSlNG 10.-(1)The Company shall construct and operate the Pipeline System pursuant to a licence granted the Minister in accordance with the provisions of the Oil Pipelines Act and this Act. (2) Without prejudice to subsection (1) of this section, the Company shall construct the pipeline system subject to any building permit granted the Town and Country Planning Authority or Department having jurisdiction over the area where the pipeline traverses. 11. Notwithstanding anything to the contrary in the Oil Pipelines Act or any enactment or law, the licence granted the Minister for the Project shall be for a period of25 years in the first instance and may be renewed for a further period of 10 years at a time.

11 12. The Company may create a mortgage using a licence granted pursuant to section 10 of this Act 13. A licence granted in accordance with section 10 of this Act shall, in addition to those rights set out in the Oil Pipelines Act, confer upon the Company and upon its officers, servants, agents and the Project contractors the right- to-enter upon (with all necessary equipment and vehicles); and to take non-exclusive possession of and use a strip of land or seabed or subsoil of a width specified in the Approved Pipeline Development Plan either side of the route specified in the Approved Pipeline Development Plan and thereon, thereover or thereunder to construct, maintain and operate the pipeline system. 14.-(1) Notwithstanding that a licence has been granted pursuant to section 10 of this Act, Company shall not commence the commissioning or operation of the pipeline system or any newly installed part thereof without a prior approval to operate given the WAGP Authority. (2) The Company in making an application for approval, and the WAGP Authority, in granting the approval to operate under subsection (1) of this section, shall follow such procedures as may be agreed between them. 15. Except as otherwise provided in this Act, no other licence or permit or authorisation is required the Company or any Project Contractor for the construction and operation of the pipeline system. 16. The Company may- construct, own and operate an electricity generating plant as part of the pipeline system; and construct, own and operate such communication facilities, as set out in the Approved Pipeline Development Plan. 17.-(1) No transit, export or import permit. licence or other authorisation shall be required the Company, a buyer, a seller or a shipper solely for the purposes of- (c) export of natural gas from Nigeria means of the pipeline system; transit of natural gas through Nigeria means of the pipeline system; or import of natural gas into Nigeria means of the pipeline system.

12 18.-(1)No shipper or buyer, who- ' acquires natural gas in Nigeria for transmission through the pipeline system; ships natural gas through the pipeline system, or (c) ships natural gas through other pipeline facilities to the pipeline system shall be required to obtain any licence or permit reason only of that acquisition or transmission. (2) No person who, in Nigeria (either on its own behalf or on behalf of another person-, offers for sale or promotes the sale of or sells natural gas to be transported through the pipeline system; or delivers gas through the pipeline system, shall be required to obtain any licence or permit reason only of that offer, promotion, sale or delivery. 19. The transmission of natural gas through Nigeria or across its territorial boundaries may be restricted during a period of a national emergency declared the President in accordance with the Constitution of the Federal Republic of Nigeria 1999 and upon the cessation of such national emergency, any restrictions placed on the transmission of natural gas through Nigeria or across its territorial boundaries shall cease. PART IV- WAGP REGULATIONS 20.-(1)The Minister shall adopt and implement, as delegated legislation, the WAGP Regulations. (2) The WAGP Regulations made the Minister pursuant to subsection (1) of this section, including any amendments or supplements thereto, shall be- consistent with similar regulations adopted in the Republics of Benin, Ghana and Togo; and consistent with the WAGP Treaty and this Act. (3) The WAGP Authority shall have exclusive power to administer and enforce the WAGP Regulations in Nigeria and may collaborate with the Minister or any relevant agency of Government.

13 21. Notwithstanding anything to the contrary in any enactment or law, any matter specified in the Second Schedule of this Act relating to the pipeline system and the Company, shall be regulated in Nigeria this Act and the WAGP Regulations. 22. The Minister may amend or supplement the WAGP Regulations to the extent that such amendment or supplement is consistent with this Act and with the obligations of Nigeria under the WAGP Treaty. PART V - FINANCIAL PROVISIONS 23. The liability for and the calculation of and method of assessment of tax payable the Company and each WAGP Company in relation to WAGP income otherwise referred to as the agreed fiscal regime, shall be in accordance with the principles and rules set out in the First Schedule to this Act. 24. The Non-WAGP Regime shall not apply to any WAGP Company in respect of WAGP activities or WAGP income except as set out in the First Schedule to this Act. 25, the-principles and rules relating to the liability for and the calculation of tax in the First Schedule to this Act shall also apply to buyers, sellers, shippers and Project Contractors to the extent specified in the First Schedule to this Act and the Non-WAGP Regime applicable to buyers, sellers, shippers and Project Contractors in respect of their activities as provided in -the First Schedule to this Act shall be modified in accordance with the First Schedule to this Act. 26.-(1)Each of the WAGP Companies, the shareholders, the Project Contractors, the buyers, the sellers and the shippers, and their counterparts, shall be entitled (solely in connection with the Project, or the transportation of natural gas in, or the sale of natural gas transported or to be transported through the pipeline system. or the provision of security for their obligations under agreements in respect of the foregoing) to do the following, that is to- open, maintain and operate bank accounts in foreign currency both inside and outside Nigeria and receive payments of any kind (including without limitation revenues in connection with the sale or transportation of natural gas) directly into all or any such accounts and retain the proceeds therein and make payments from such accounts as it should think fit;

14 (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) transfer foreign currency into Nigeria; purchase local currency at the most favourable rate available and in any event at a rate not less favourable than that which is generally made available the Central Bank of Nigeria; convert local currency into foreign currency at the most favourable rate available and in any event at a rate not less favourable than that generally made available the Central Bank of Nigeria; transfer, export and hold foreign currency outside of Nigeria; obtain and use letters of credit in foreign currency; utilise foreign currency in Nigeria without restriction, other than local costs incurred in Nigeria with suppliers of goods or services who are residents of Nigeria which shall be paid in Naira; be exempted from any rule or regulation of Nigeria requiring the repatriation or mandatory conversion of foreign currency into local or any other currency; pay in foreign currency all salaries, allowances and other benefits due to any of their employees in connection with or relating to the Project, other than residents of Nigeria who are only engaged in relation to the Project in Nigeria; pay in foreign currency any amount due to foreign Project Contractors, shareholders or lenders in connection with the Project; make any other payments due in connection with or relating to the Project in foreign currency, other than costs incurred solely in Nigeria with residents of Nigeria; and enter into contracts with each other for services or the sale of goods, and to make payment for such goods or services, in any foreign currency. 27. Notwithstanding anything to the contrary in any enactment or law, the Company shall be entitled to- borrow money or raise equity in foreign currency from any source, and in each case, without the requirement for any further approval, consent or administrative act of Nigeria or any State authority;

15 (c) (d) (e) remit to shareholders out of Nigeria any dividend derived from the Company or its affiliate in Nigeria or return of capital without any deduction, withholding or other cost, in each case without the requirement for any further approval, consent or administrative act of Nigeria or any State authority; grant security over any property of the Company or its affiliate in Nigeria or elsewhere to lenders or other creditors or potential creditors, including balances in local and foreign currency bank accounts within or outside Nigeria; service or repay foreign loans and pay associated fees and indemnities in any currency without being subject to any tax or withholding obligation or deduction; and remit to its lenders any principal, interest, fees or other borrowing costs owed or payable the Company or its affiliate in Nigeria without any deduction, withholding or other cost, in each case without the requirement for ally further approval, consent or administrative act Nigeria or any State Authority. 28. The Nigerian National Petroleum Corporation established pursuant to the Nigerian National Petroleum Corporation Act, 1990 (in this Act referred to as "the Corporation") shall have power to undertake any commitment in any commercial agreement relating to the Project to which it is a party. 29. In addition to the provisions of the Nigerian National Petroleum Corporation (Projects) Act, 1993, the Corporation or any of its subsidiaries may charge any of its assets, revenues and accounts as are set aside for the Project as security for the performance of its obligations under any agreement relating to the Project to which it is a party. 30. The President of the Federal Republic of Nigeria may in the name and on behalf of Nigeria in writing guarantee the performance the Corporation of its undertakings under any agreement relating to the Project to which the Corporation is a party. 31.-(1)Subject to such exceptions as may be contained in any commercial agreement to which it is a party, Nigeria or the Corporation unconditionally waives any immunity from suit, execution or other legal process in connection with any action or proceeding to obtain or enforce an arbitral award in relation to the Project. (2) The amount of any award obtained against Nigeria or the Corporation under a dispute resolution procedure in any agreement relating to the Project to which it is a party will constitute conclusive evidence of the existence and amount of the claim against it.

16 PART VI-ENVIRONMENTALPROVISIONS 32. The Company, its affiliates. shareholders or the Project Contractors shall be liable for any environmental damage that occurs reason of any of the Project activities. 33.-(1)The Company. any of its shareholders or their affiliates. lenders of the Company or the Project Contractors shall not be liable for any environmental damage that occurs other than reason of any of the Project activities. (2) Any environmental damage or adverse environmental effects identified in the environmental impact assessment of the Project as existing prior to the construction commitment date shall be deemed to have existed prior to the commitment of the Project activities and shall not be deemed to have been caused the Company, its affiliates, shareholders or its lenders or Project contractors. (3) No buyer, seller or shipper shall be liable for any environmental damage that was not caused its activities. 34. Notwithstanding any exemption mentioned in section 33 of this Act. if an existing environmental damage which occurred prior to the construction commitment date will be exacerbated any environmental impact identified in the environmental impact assessment carried out for the Project. the Company. its affiliates or the Project Contractors shall take appropriate mitigation or remediation measures to prevent the worsening of the existing environmental damage. PART VII-MISCELLANEOUS PROVISIONS 35. The Minister may, upon receipt of a copy of a notice from the WAGP Authority to the Company given in accordance with Article IV 2 (2) (xiii) of the WAGP Treaty, make Regulations requiring as a matter of law the Company to comply with the provisions of the Access code. 36.-(1) Subject to the provisions of subsection (2) of this section, none of the following shall constitute a breach of any law prohibiting or restricting any person from acting in concert or combination in relation to competition in a market or the fixing of prices, that is- the entry into the International Project Agreement the Company or the performance of its obligations thereunder;

17 the acquisition of natural gas in a State a buyer or shipper for transmission through the pipeline system or the shipping of natural gas through the pipeline system or through other pipeline facilities to the pipeline system a buyer or shipper; (e) (d) (e) the offer for sale or sale of natural gas in a State a shipper or seller which is delivered out of the pipeline system or the delivery of natural gas into a State through the pipeline system a shipper or seller; the formation of the Company the shareholders; or the formation of a buyer or seller or shipper the shareholders or members of any group or consortium. (2) Except in relation to conduct specifically contemplated in the International Project Agreement or the Access code, this subsection shall not- permit or authorise unreasonable discrimination against buyers or shippers; permit the conduct the Company, a buyer, a seller or a shipper which constitutes unfair discrimination; or (c) permit a lessening of competition, or other conduct which may otherwise be regarded under competition law as an abuse of a dominant market position. 37.-(1)The pipeline system when placed in, under or over land, in accordance with the terms of the licence, shall remain the property of the Company, notwithstanding any suspension, termination, cancellation or expiry of the licence. (2) No third party shall acquire ownership or interest in the pipeline system merely the fact of its situation in, under or over land in which that third party has an interest. 38. Notwithstanding anything to the contrary in any enactment or law, any WAGP Company or any shipper may arrange any insurance coverage for its activities under this Act in any country of its choice. 39.-(1)Notwithstanding anything to the contrary in any enactment or law and subject to subsection (2) of this section, the Company and the WAGP Authority shall carry out the Project in accordance with the provisions of this Act.

18 (2) The following enactments or laws shall not apply to any WAGP Company, buyer, seller, shipper and Project Contractor in respect of the Project, that is- (c) (d) (e) (f) sections 17 (I) and 18 of the Oil Pipelines Act and any regulations made pursuant to the Oil Pipelines Act; the Petroleum Act and all regulations and statutory guidelines made thereunder; the Export (Incentives and Miscellaneous) Act (as amended); Wireless Telegraphy Act (as amended) Nigerian Investments Promotion Commission Act (as amended); Investment and Securities Act. 40. Subject to the Constitution of the Federal Republic of Nigeria, 1999, if any other law in Nigeria is inconsistent with the provisions of this Act for the purposes of the Project, this Act shall prevail and that other law shall to the extent of the inconsistency be consequentially amended. 41.-(1) In this Act, unless the context otherwise requires- access code" means an access code applying to all gas transportation agreements for transportation of natural gas in the pipeline system other than foundation gas transportation agreements, agreed the Company and the WAGP Authority; "accounting principles" means principles for accounting which are in accordance with international accounting standards, on an accrual basis (as opposed to cash) unless otherwise specifically provided in the International Project Agreement, with revenues attributed to the accounting period in which they are earned, and costs and expenses to the accounting period in which they are incurred without the need to consider when the amount is received or disbursed in connection with a particular transaction and costs and expenses deemed to have been incurred, in the case of physical items, in the accounting period when title passes, and in the case of services, in the accounting period when such services are performed; "administrative fees" means any fees, charges or other imposts which are imposed or charged for services, materials or rights provided or granted any State or State authority";

19 "affiliate" means, with respect to a person, any other person (or two or more persons acting together) that directly or indirectly through one or more intermediaries, controls, is controlled or is under common control with that person, or who possesses or possess directly or indirectly, the power to direct or cause the direction of the management and policies of that person, whether through the ownership of voting securities, contract, law or otherwise; "agreed fiscal regime" means the regime mentioned in Section 23 of this Act and set out in the First Schedule to this Act; "approval to operate" means an approval to operate the pipeline system given the WAGP Authority to the Company in accordance with the International Project Agreement; "Approved Pipeline Development Plan" means the Pipeline Development Plan which is approved the WAGP Authority in accordance with the International Project Agreement, as it may be amended from time to time the Company and the WAGP Authority; "buyer" means a purchaser from a shipper of a natural gas which has been or is to be transported through the pipeline system; "commercial agreements" means the gas purchase agreements, gas sales agreements, gas transportation agreements, interconnection agreements and credit security agreements defined as Commercial Agreements in the International Project Agreement; "Commission" means Corporate Affairs Commission established under Section 1-of the Companies and Allied Matters Act 1990; "Committee of Ministers" means the committee established in accordance with Article X (I) of the WAGP treaty; "Company" means the West African Gas Pipeline Company Limited; "Constitution" means the Constitution of the Federal Republic of Nigeria 1999; "construction commitment date" has the meaning given to it in the International Project Agreement; "Corporation" means the Nigerian National Petroleum Corporation established under the Nigerian National Petroleum Corporation Act 1990 and any of its wholly owned subsidiaries;

20 "debt" means any actual obligation (whether present or future, secured or unsecured) for the payment or repayment of money (excluding contingent liabilities, amounts owing to trade creditors, and other liabilities incurred in the ordinary course of business); "ELPS" means the Escravos - Lagos Pipeline System located in Nigeria; "enabling legislation" has the meaning given to it in the International Project Agreement: "environmental impact assessment" has the meaning given to it in the international Project Agreement and the Environmental Impact Assessment Act 1992; "exempt goods list" means the list agreed the Company and the WAGP Authority in accordance with Clause of the International Project Agreement, and includes any amendments to that list agreed from time to time; "fiscal laws" means laws in force in a State applying in respect of the Project and governing the fiscal topics addressed in the Agreed Fiscal Regime (including, to the extent applicable to this Act); "foreign currency" means any freely convertible currency, including US dollars, that is the lawful currency of a State (other than the lawful currency of any of the States); "foundation gas transportation agreement" has the meaning given to it in the International Project Agreement; "gas transportation agreement" means an agreement between a person and the Company for the transportation the Company on behalf of that person of natural gas through the pipeline system: "Government" means the Federal Government of the Federal Republic of Nigeria; "interest" includes all other forms of return in respect of a debt claim (other than repayment of the debt) including, for the avoidance of doubt, discounts, fees and charges; "International Project Agreement" means the international project agreement made between the Republic of Benin, the Republic of Ghana, the Federal Republic of Nigeria, the Republic of Togo and the West African Gas Pipeline Company concerning the West African Gas Pipeline Project; "Legislature" means the National Assembly of Nigeria;

21 "Minister" means the Minister for the time being charged with responsibility for petroleum; "natural gas" means any hydrocarbons (or a mixture of hydrocarbons and other gases) which at a temperature of 60 degrees Fahrenheit and at atmospheric pressure are predominantly in a gaseous state; "Nigeria" means either the Federal Republic of Nigeria or the territory of the Federal Republic of Nigeria as the context may require; "Non-WAGP Regime" means the legislation, regulations, principles of interpretation and application and any other features of the system of taxation applicable either generally or specifically in Nigeria, as amended, modified or enacted from time to time, which is not legislation introducing, amending, modifying, re-enacting or consolidating the agreed fiscal regime; "Pipeline Development Plan" means the development plan for the pipeline system prepared in accordance with the International Project Agreement; "pipeline licences" has the meaning given to it ill the International Project Agreement; "pipeline system" means a Natural gas pipeline running from the ELPS, through Benin and Togo, to a terminus initially near Takoradi, Ghana to be developed, built, operated and maintained the Company under the terms of the International Project Agreement together with ancillary permanent facilities which are needed for the construction and operation thereof (including compression stations, metering stations, valve stations, pig launching and receiving stations and Supervisory Control and Data Acquisition systems (SCADA) and includes any extension or expansion. "Project" or "West African Gas Pipeline Project" means the development of specifications, feasibility and market studies, design, financing, construction, ownership, operation and maintenance of the pipeline system; "project activities" means activities undertaken within one or more of the States a WAGP Company. the shareholders or the Project contractors in connection with the implementation of the Project; "project authorisations" means all rights, permits. licences, consents, permissions, exemptions and approvals (including those identified in detail in the Approved Pipeline Development plan ) which are needed a WAGP Company or a Project contractor for the successful implementation of the Project, or to fulfill commitments made under the commercial agreements or for the exercise of any of the rights of the Company under the International Project Agreement, and includes the pipeline licences;

22 "Project Contractors" means any contractors, sub-contractors, advisers or agents of the Company engaged in connection with the implementation of the Project: "Project rights" means all of me rights, entitlements and benefits conferred on the Company the International Project Agreement, including the right of the Company to be issued the Project Authorisations and to implement the Project in accordance with the terms of the International Project Agreement; relevant Minister" means the Minister of each State from time to time having power to make regulations under the enabling legislation; "rules of procedure" means the rules of procedure to be established the Relevant Ministers in accordance with Article VI of the WAGP Treaty; "SCADA" means Supervisory Control and Data Acquisition System; "sellers" means the sellers of natural gas which has been or is to be transported through all or part of the pipeline system; "shareholders" means- (c) (d) (e) (f) the Chevron Texaco West African Gas Pipeline Company Limited; the Nigerian National Petroleum Corporation; the Shell Overseas Holding Limited; the Tekoradi Power Company Limited and subject to the exercise of existing options to take up shares in the Company; Societe Beninoise de Gaz S.A.; and Societe Togolaise de Gaz S.A., and their successors and assigns each a "shareholder"; "shipper" means a person who enters into a gas transportation agreement with the Company;

23 "State authorities" means the Government and each aspect thereof at every level, including central. regional and local authorities or bodies. and all non-judicial instrumentalities. statutory bodies, taxing authorities, branches and subdivisions of any of the foregoing, and any entity which is directly or indirectly controlled Nigeria or one or more State Authorities; and includes the State Environmental Protection Authorities, the Tax Authority of Nigeria and the Technical Authority; "State Environmental Protection Authorities" include- (c) (d) (e) (j) (g) the Federal Ministry of Environment: the environmental section of the Department of Petroleum Resources of Ministry of Petroleum Resources; the Lagos State Environmental Protection Agency; the Ministry of Environment and Physical Planning of Lagos Slate; the Ogun State Environmental Protection Agency; the section or department of the Office of the Governor of Ogun State having responsibility for environmental matters; and the environmental section of the National inland Waterways Authority; "States" means Benin, Ghana, Nigeria and Togo: each is a "State; "Steering Committee" has the meaning given to it in the International Project Agreement; "tax" or "taxes" means any existing or future taxes, levies, duties, customs, imposts, contributions (such as social fund and compulsory medical insurance contributions), fees, assessments or other similar Charges payable to or imposed Nigeriaor a State Authority, but does (not) include Administrative Fees to the extent that they do not exceed a reasonable amount for the services, materials or rights provided or granted; "tax authority" means- in respect of Benin. the Direction Generale des Imports. in respect of Ghana-

24 (i) in respect of value added tax. the Value Added Tax Service. (ii) (iii) in respect of customs and excise duties, the Customs, Excise and Preventive Service, or in respect of Income Tax or any other Tax matter, the Internal Revenue Service; (c) in respect of Nigeria- (i) (ii) in respect of income tax and valued added tax, the Federal Inland Revenue Service, and in respect of customs and excise duties, the Nigerian Customs Service. and (d) in respect of Togo, the Direction Generale des Imports, or in each case, their successor bodies; "tax year" means a period of one year beginning on 1 st January and ending on 31st December; "Technical Authority" means the Ministry of Petroleum Resources; "US dollars" or "US$" means the lawful currency of the United States of America; "WAGP activities" include any activity of the Company or any subsidiary of the Company which- are engaged in the Company or its subsidiary in relation to the pipeline system, business or for the purpose of furthering the West African Gas Pipeline system business; or are agreed the Company and the WAGP Authority to be a WAGP Activity, but shall not include- (i) (ii) the operation of local distribution companies, or any other activity agreed the Company and the WAGP Authority not to be a WAGP Activity; "WAGP Company" means the Company and any wholly owned subsidiary of the Company which is the subject of a notification to the WAGP Authority and the tax authorities in accordance with the International Project Agreement; WAGP Income" has the meaning given to it in paragraph 7 of the First Schedule to this Act;

25 "WAGP Treaty" means the treaty concerning the West African Pipeline Project made between the Republic of Benin, the Republic of Ghana, the Federal Republic of Nigeria and the Republic of Togo concerning the West African Gas Pipeline Project; "'WAGP Tribunal" means the tribunal of that name established the WAGP Treaty; "WAGP Regulations" means regulations governing the construction and operation of the pipeline system (including the matters referred to in the Second Schedule to this Act), to be adopted the Minister under this Act; and "West African Gas Pipeline Authority" or "WAGP Authority" means the body established under the WAGP Treaty. (2) Any term, word or phrase not specifically defined in this Act shall have the same meaning as in the International Project Agreement. 42. This Act may be cited as the West African Gas Pipeline Project (Special Provisions, etc.) Act, FIRST SCHEDULE Section 23 SUPPLEMENTARY PROVISIONS RELATING TO AGREED FISCAL REGIME PART I -GENERAL PROVISIONS RELATING TO AGREED FISCAL REGlME 1.-(1) This Schedule sets out the principles and rules relating to the liability for. and the calculation of, and method of assessment of, tax on the Company (including in respect of each other WAGP Company that is deemed to be a branch of the Company in accordance with paragraph 16 (3) of this Schedule in relation to WAGP income. (2) For the purposes of this Schedule all income accrued and expenses incurred any WAGP Company in respect of WAGP activities shall be deemed to be income accrued and expenses incurred the Company, and the Company shall accordingly be liable to pay income tax in respect thereof.

26 (3) No WAGP Company other than the Company shall have any liability to income tax in respect of WAGP activities. (4) The Non-WAGP regime shall not apply to any WAGP Company in respect of WAGP activities or WAGP income except as set out in this Schedule. (5) All Income tax liabilities of the Company, and payments made the Company in respect of those liabilities shall be to the Tax Authority of Nigeria. (6) The WAGP Authority will participate in the determination of the liability of the Company to pay Income Tax as set out below. (1) The income tax liability of the Company shall be calculated reference to tax years. 2.-(l) The principles and rules relating to the liability for and the calculation of tax on buyers, Other persons, sellers, shippers and Project contractors shall be as set out in this Schedule. (2) The Non-WAGP regime applying to such persons ill respect of any activities contemplated in this Schedule shall be modified in accordance with this Schedule. (3) If any WAGP Company undertakes any action, transaction or agreement (whether or not as a part of an arrangement or series of arrangements) where the principal purpose is- to obtain for the Company a relief (or increased relief) from, or repayment or increased repayment of, income tax on WAGP income imposed this Schedule; or for the avoidance or reduction of a charge to such a tax or an assessment to such a tax, the amount of the relief, repayment or charge for the Company shall be the amount that would have been the case had the action, transaction or agreement or arrangement or series of arrangements not been undertaken. 3.-(1) For the purposes of this Schedule- "agreed fiscal regime" means the fiscal regime as set out in Section 23 of this Act and this Schedule;

27 "applicable person" means a WAG!' Company or any other person (including Project Contractors, buyers, sellers and shippers) to whom the agreed fiscal regime is intended to apply; "applicable rate" means a rate of interest equal to 15 per cent per annum, compounding annually; "certification system" has the meaning given to it in the International Project Agreement; "completion date" has the meaning given to it in the International Project Agreement; "construction expenditure" has the meaning given to it in the International Project Agreement; "debt" means any actual obligation (whether present or future, secured or unsecured) for the payment or repayment of money (excluding contingent liabilities, amounts owing' to trade creditors, and other liabilities incurred in the ordinary course of business); "Dispute Resolution Procedure" has the meaning given to it in the International Project Agreement; "Eligible Development Costs" has the meaning given to it in Schedule 16 of the International Project Agreement: "equity" means total assets, including retained earnings and other surplus reserves, less total liabilities (including Debt), the resulting sum equal to the values ascribed to common stock, preferred stock, capital surplus or paid in capital and retained earnings or earned surplus, as disclosed in audited accounts; "Fiscal Review Board" means the Fiscal Review Board established in accordance with the WAGP Treaty; "fiscal start date" has the meaning given to it in the International Project Agreement; "income tax" means amounts payable a WAGP Company in accordance with Part II of this Schedule; "minor taxes" means taxes other than income tax, VAT and customs duties; "Non-WAGP regime" means the legislation, regulations, principles of interpretation and application and any other features of the system of taxation applicable' either generally or specifically in Nigeria, as amended, modified or enacted from time to time, which is not legislation introducing, amending, modifying, re-enacting or consolidating the agreed fiscal regime:

28 "reservation charge" has the meaning given to it in the International Project Agreement; and WAGP Authority Charge" has the meaning given to it in the International Project Agreement. PART II - INCOME TAX 4.-(1) Subject to the principles and rules set out in this Schedule, and in particular to paragraph 13 of this Schedule, the Company shall be liable to pay to Nigeria, in respect of each tax year, income tax at the rate of 35 per cent of its taxable income attributable to Nigeria in the tax year. (2) The taxable income of the company attributable to Nigeria shall be calculated as set out below, following the apportionment between the States of WAGP income, allowable expenses and capital allowances as set out in this Schedule. (3) In calculating the amount due in respect of income tax from the Company to Nigeria, credit shall be given for any amount in respect of which an election is made the Company under this paragraph. (4) In this Part of this Schedule, State liability" means- (c) (d) an amount of money which has been determined under the dispute resolution procedure to be owing Nigeria to the Company under Clause 36.4 of the International Project Agreement; an amount of money which has been determined in accordance with this Schedule to be owing Nigeria to the Company under the fiscal laws (whether laws implementing the provisions of paragraph 11 of this Schedule or paragraph 35 of this Schedule or otherwise) and in respect of which no further appeal is permitted under Part VII of this Schedule (whether as a result of the expiry of any time limit or otherwise) or in respect of which Nigeria has confirmed that no appeal will be made it; an amount of money which is deemed under subparagraph (5) or (6) of this paragraph to be owed Nigeria to the Company; an amount of money which has been determined under subparagraph (7) of this paragraph to be owing Nigeria to the Company; or

29 (e) interest on any of the above amounts arising under Clause 44.3 of the International Project Agreement or paragraph 20 of this Schedule. (5) Where the Company claims that an amount is owing Nigeria to the Company under the fiscal laws (whether" laws implementing the provisions of paragraphs (2) and (4) of this Schedule or otherwise) including interest thereon arising under paragraph 20 of this Schedule, and in respect of which a further appeal is permitted under Part 7 of this Schedule and in respect of which Nigeria has not confirmed that no appeal will be made it, the Company may give to the WAGP Authority and to the Tax Authority of Nigeria written notice setting our particulars of the amount in question and the circumstances ill which the liability arose. (6) If Nigeria disputes that any part of the amount set out in the notice is owing to the Company, it may within 30 days of receipt of such notice make application to the WAGP Tribunal for a determination that such amount or a part of it is not owing Nigeria to the Company and if Nigeria does not make such an application or does not make it in respect of the whole of the amount claimed, then for the purpose of this Schedule the amount stated in the notice, or if Nigeria disputes only part of the amount stated in the notice, the balance of the amount claimed shall be deemed to be owing Nigeria to the Company and shall be a State liability in accordance with subparagraph (1) of this paragraph. (7) If Nigeria makes an application in accordance with subparagraph (6) of this paragraph to the WAGP Tribunal for a determination that an amount is not owing it to the Company and if- (c) the application is dismissed in whole the WAGP Tribunal, the amount stated in the notice shall be deemed to be owing and shall be a State liability; the application is dismissed in part the WAGP Tribunal, the amount stated in the notice which relates to that part of the application which was dismissed shall be deemed to be owing and shall be a State liability; or the WAGP Tribunal makes a determination that an amount is owing, then that amount shall be a Stale liability. (8) The Company may notice, given in a return, elect to treat any part of a State liability as a credit in the calculation of!he amount of income tax due to Nigeria in respect of the tax year to which the return relates and where a notice is given in accordance with this paragraph the liability of the Company to income tax for the tax year to which the return relates shall be reduced accordingly.

30 5. The taxable income for any period shall be equal to the amount of WAGP income attributable to Nigeria for that period less 'he aggregate of- (c) allowable expenses attributable to Nigeria for that period; capital allowances attributable to Nigeria ill respect of that period; and any allowable losses available in Nigeria. 6. For the purposes of this Part of this Schedule- "income" means any receipts or realised gains of a revenue nature, determined in income and accordance with the accounting principles and for the avoidance of doubt, income includes expenses, amounts recovered way of insurance claims, judicial or arbitral awards, recovered legal costs, rental or refunds, proceeds from sale or exchange of plant or facilities or supplies, or sale or licence of intellectual property, where under the accounting principles such amounts would be treated as income; and "expenses" means any payment or outflow or depletion of assets or incurrence of liabilities, other than distributions to equity participants. 7.-(1) Subject to subparagraph (2) of this paragraph, the amount of WAGP income for any tax year is the aggregate of- (c) (d) payments accrued the Company during that tax year that are derived from natural gas transportation operations which are WAGP activities; income accrued during that tax year in respect of any debt claims in which the Company is the creditor; any other income incidental to WAGP activities accrued the Company during that tax year; and any negative pool balance in respect of that tax year. (2) WAGP income shall not include-

31 (e) (d) any amount accrued in respect of the disposal of any capital asset other than as provided under subparagraph (1) (d) of this paragraph; any accrual in respect of the WAGP Authority charge or any part of the WAGP Authority charge; any dividend or any accrual in respect of any dividend received from any WAGP Company; any amount accrued or payable to a WAGP Company a State under the International Project Agreement except where and to the extent that the amount paid is compensations for or reimbursement of lost WAGP income, or (e) any interest or other income accruing prior to the fiscal start date. 8.(1) Allowable expenses for a period means all expenses (other than non-allowable expenses) Allowable which are incurred in that period including accruals on any debt claims where the Company is the debtor wholly, exclusively and necessarily for the purpose of deriving WAGP income: Provided that expenses will be considered to be necessarily incurred where the Company believes at the time the expenses are incurred, mar to incur the expenses is reasonable and appropriate to enable, facilitate, develop or make more efficient the carrying out of WAGP activities or the deriving of WAGP income. (2) For the avoidance of doubt, expenses shall not cease to be allowable expenses solely as a result of being incurred in respect of related party transactions. (3) For the purposes of this Schedule, an expense shall be treated as incurred at the time at which and to the extent that an accrual in respect of such expense is properly recordable in the accounts of the Company in accordance with the accounting principles or in the case of costs incurred shareholders or their affiliates, in the account of that person in accordance with its accounting 9. Non-allowable expenses means all expenses, other than allowable expenses, which shall include- expenses that are interest to the extent that-